Johor to raise property tax for foreigners

Johor state will implement higher tax rates for some 130,000 foreigners owning properties by the end of this year, said Johor Menteri Besar Mohamed Khaled Nordin.

However, the tax increase has not been specified yet. The proposed increase is considered as a way to curb the skyrocketing Johor property prices spurred by keen interest among foreign buyers, 90% of whom are Singaporeans.

Datuk Seri Mohamed Khaled added that most locals will be in agreement over this new policy and it is done to increase the state's returns. He also noted that the rates will be re-evaluated to reflect current property values as the last formal evaluation was done 30 years ago.

In Johor, the annual assessment rate for residential properties is 0.14% of the property value and 0.2% for business holdings. For a RM500,000 (S$204,000) house, owners need to pay RM700 a year.

Currently, foreigners are limited to buying properties worth a minimum of RM500,000. The state also charges them RM10,000 as state levy.

Besides, a real property gains tax (RPGT) of 15% is charged on the net profit from the transaction if the property is held for less than two years. There is a 10% RPGT for properties held between two and five years and none after five years.

Johor property agents are unsure of the impact that new rates will bring to the market. Some of them are of the view that foreigners might be taken aback, but they will see that property prices in Johor are still affordable because any tax increase will be negligible when compared to Singapore's much higher price and rental values.

According to property consultants, in East Ledang, one of Johor's pricier areas, a bungalow costs about RM4.7 million while the equivalent in Singapore could fetch three to four times of that price.